Payroll Expense Tax 2018
The 2012 Gross Receipts Tax Ordinance set the new tax to phase in gradually over time. In 2014, gross receipts rates were 10% of the voter approved maximum, rising to 25% in 2015, 50% in 2016, 75% in 2017, and finally 100% in 2018. The tax change was designed to be revenue-neutral: revenue raised by the new gross receipts tax would be used to retire the payroll expense tax. The Controller’s Office is directed to compute the payroll expense tax rate during the phase-in period, using formulas in the ordinance. In 2018, the final year of the phase-in period, the Controller’s Office projects the payroll expense tax rate to be approximately 0.5%.
The basic reason for the remaining payroll expense tax rate in 2018, after the gross receipts tax has fully phased in is that gross receipts tax revenue has been less than expected.
The Payroll Expense Tax rate for tax year 2018 will be calculated using tax data as of July 1, 2018 and will be announced on or before September 1, 2018, in accordance with City law. The 2018 Payroll Expense tax rate will apply to future tax years as well. The Payroll Expense Tax rate for tax year 2018 may be in the range of 0.4% (0.004) to 0.6% (0.006), according to projections by the City Economist published in 2017.
For taxpayers filing their final return prior to the announcement of the Payroll Expense Tax rate for tax year 2018, or taxpayers that wish to accrue obligations, a provisional rate of 0.448% may be used.
The provisional Payroll Expense Tax rate has been calculated by increasing the Payroll Expense Tax adjustment factor from tax year 2017 (0.336%) by 133%, the same percentage that Gross Receipts Tax rates will increase in tax year 2018. If the actual 2018 Payroll Expense Tax rate is less than 0.448%, taxpayers may request a refund within the time limits of City law.